April 25, 2018 / 5:17 PM / 5 months ago

Lockheed, MBDA eye German missile defence contract by year-end

BERLIN (Reuters) - U.S. arms maker Lockheed Martin Corp (LMT.N) and Europe’s MBDA hope to finalise a contract with the German government by the end of the year for a new air and missile defence system worth billions of euros, a top Lockheed executive said on Wednesday.

FILE PHOTO: Lockheed Martin's logo is seen during Japan Aerospace 2016 air show in Tokyo, Japan, October 12, 2016. REUTERS/Kim Kyung-Hoon

MBDA’s German unit and Lockheed formed a 60-40 joint venture in March to press ahead with the new TLVS defence system after years of negotiations with the German defence ministry.

The German defence ministry announced in 2015 that it had chosen the Medium Extended Air Defence System (MEADS) — developed with $4 billion (3 billion pounds) in funding from Germany, Italy and the United States — over Raytheon Co’s (RTN.N) Patriot system.

TLVS is the German version of MEADS.

FILE PHOTOI: European Defense Group MBDA's company logo is pictured in Schrobenhausen near Ingolstadt, Germany, June 25, 2015. REUTERS/Michaela Rehle

However, the two sides have been struggling to work out the details and terms of the programme ever since.

Frank St. John, who took over as executive vice president of Lockheed’s Missiles and Fire Control division in January, told Reuters the process had taken longer than expected but he was feeling more confident and enthusiastic now.

“The goal is to be on contract by the end of this year, but the process will take as long as required,” St. John said in an interview at the ILA Berlin Air Show, where the companies are displaying the mobile air defence system.

Progress on the German deal could also trigger more interest by other countries in the system, which will offer the ability to knit together a variety of different systems, including Patriot, St. John said.

Lockheed builds the PAC-3 Missile Enhancement Segment (MSE) missiles used by the Patriot system.

“The good thing about TLVS is, because of the open architecture, you can plug in some legacy capabilities and then phase those out as you plug in new capabilities,” he said.

Thomas Gottschild, managing director of the German unit of MBDA, told a news conference the team was “in the final straight” on the project but did not predict when a contract would be signed. MBDA is jointly owned by Airbus Group (AIR.PA), Britain’s BAE Systems (BAES.L) and Italy’s Leonardo (LDOF.MI).

St. John said the German ministry was expected to issue a final request for proposals to the joint venture in about two weeks, with a final response to be submitted in 60 days.

That would be followed by a “hopefully short negotiation process,” and a contract signing at the end of this year or early next, he said. Years of discussion and negotiation meant the technical issues were now well understood.

The TLVS programme was initially slated to cost about 4 billion euros (3.5 billion pounds), but sources familiar with the proposal have said the final cost is likely to be several billion euros higher.

The MEADS system was developed jointly by Germany, Italy and the United States, though the U.S. Army later decided not to buy the system for its own use.

Reporting by Andrea Shalal; Editing by Alexandra Hudson

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